Big Money is Betting on Gold
One of the big recent stories in the Gold market has been billionaire investor Stanley Druckenmiller’s major bet on Gold. According to a story in ZeroHedge, Druckenmiller has just raised his Gold holdings to 20 percent of the asset allocation reported by his Duquesne Family Office. (Source: ZeroHedge 2015 August 16th)
What makes this story interesting is that while Druckenmiller has been critical of the Fed’s zero interest rate policy over the years, he has not been a big investor in Gold. That is up until now. The ZeroHedge article reports that his largest holding was about 2.9 million shares of SPDR Gold Trust (GLD), or about 20% of his holdings. This position represents approximately $300 million dollars.
One of the reasons this is big news for the Gold market is that Druckenmiller’s track record as an investor is stellar. According to an article in Casey Research, Druckenmiller is one of the worlds most respected and successful traders. As a hedge fund manger, from 1986 to 2010 he generated an average annual return of 30%. (Source: Casey Research 2015 August 17th)
Average annual returns of 30% over a 20 plus year period is among the best in the industry. He has said in the past when he sees something that really excites him he will “bet the ranch on it”. (Source: Business Insider August 17th 2015) So a 20% Gold allocation for a billion dollar portfolio is a big deal.
Will Others Follow Druckenmiller’s Lead
With so many risks converging on the world economy right now betting on Gold could be a trend that will soon develop in the hedge fund community. With global stocks tumbling in many parts of the world, and warnings of an impeding implosion in the bond market, having a high allocation to Gold right now makes sense.
The recent volatility in the markets is a sign that uncertainty and fear are driving trader and investor behavior. Gold is one of the more effective risk management investments, as it is a hedge against severe market disruptions.
Years of reckless monetary policies by the Central Banks are starting to show there unintended consequences. Mr. Druckenmiller undoubtedly knows that owning something that has tangible value and is a store of wealth in this type of environment is a must.
Note: Small investors in exchange traded funds may not have the option to take physical delivery of Gold. Therefore, in our view, the best way for the individual investor to own Gold is in physical form.
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